Brexit is still a burden for the British currency. Since the referendum, the pound has been weaker by several percent in relation to the euro and the zloty. This weekend's statement by the French President gave hope for better exit conditions for Britain, which would be beneficial for the pound. Will the British Government make the necessary concessions?
In Sunday's BBC interview, French President Emmanuel Macron suggested that a more favourable agreement could be reached between the UK and the EU compared to what was previously offered by Brussels negotiators. In fact, the French President indicates something between full access to the common market and a trade agreement.
"Macron's interview is particularly interesting as France has been one of the countries that have been most dependent on the United Kingdom's demands. The French President also said that the huge British financial services sector could be included in this potential agreement," says Bartosz Grejner, Conotoxia Analyst.
On the other hand, this would mean more significant concessions from UK Prime Minister Theresa May on the free movement of EU citizens after Brexit. However, after the last elections in the Isles, May's position as well as the conservative Tory party depreciated within the country. It is not clear which concessions the party will allow.
According to a survey published today by "UK in a Changing Europe", as many as 74% of the group's members are against the free movement of EU citizens to the UK and 63% do not want the European Court of Justice to have any influence on jurisdictions within their country after March 2019.
"Euroscepticism among the Tory party and the unwillingness to have closer relations with the EU after Brexit will likely have a negative impact on the UK’s economy as a whole (with an extensive financial sector), which would also have an impact on the pound," says Bartosz Grejner. Since the referendum in mid-June 2016, the pound depreciated around 14% to the euro and 17% to the zloty.
"If we are witnesses of hard Brexit, the pound may depreciate even more. On the other hand, the pound may gradually pare losses from mid-2016 if the tendency towards maintaining a relatively close UK-EU relationship wins, which is supported by hopes of improved economic conditions within the country", says Conotoxia Analyst.
